Central Banking, Inflation, and Right-Wing Extremism

IN THE 1960S AND 1970S the John Birch Society (JBS) was  the  best-known exponent of right-wing extremist thought in the United States. JBS founder Robert Welch’s 1966 essay “The Truth in Time,” which appeared in the JBS house organ American Opinion, remains a central text for U.S. right-wing extremism. Obsessed, as the right was at that time, with the “menace of the Communist conspiracy” which is nonetheless “only a tool of the total conspiracy,” Welch’s propaganda is directed at a “ruling clique” called “the Insiders.” “Under the guise of humanitarianism, and in the pretended promotion of freedom and brotherhood,” Welch writes, “these Insiders, and the gullible idealists who served as their dupes, were busily undermining the very beliefs and institutions which made the Nineteenth Century a high water mark of such civilization as man has laboriously achieved.”

According to Welch and the JBS, the main tool of these “Insiders” was “progressive legislation”; on this view all social welfare programs, such as worker’s compensation and Medicare, “made possible, of course, by idealists with only the noblest of intentions,” were “rot introduced in the name of progress.” The goal of such measures was to “reduce the responsibilities and rights of individual citizens, while steadily increasing the quantity, the reach, and the potential tyranny of governments.” And chief among the tools to accomplish these goals were “such decisively important measures as . . . central banking, a graduated personal income tax, and the direct election of senators.”

By “central banking” Welch refers in particular to the U.S. Federal Reserve, the body that has remained a touchstone for the far right in the United States since its creation by the Federal Reserve Act of 1913. Welch writes that the Fed’s long-range significance and use could be well hidden under the pretended objectives at the time of its founding. And its ultimate value to the conspirators could be tremendously enhanced by the character and ability of the good men drawn into its top positions during the  early  decades  of  its existence. But what this function and prestige of the Federal Reserve System would inevitably come to mean, in time and in actual practice, was the control of credit, the control of the money supply, the ability to spend with increasing profligacy, and the means to steal continuously from the people by the debasement of our currency, on the part of the Federal Government.

Welch insists that inflation itself is a “tax,” so that, as a 2009 JBS pamphlet called “What Is Money?” puts it, “the value of money ends up in the possession of whoever does the inflating.” Rather than the standard economic definition of inflation as an increase in prices, the JBS defines inflation as “an increase in the amount of currency in circulation,” despite the fact that inflation frequently does occur without any such increase (see Frisch 1983  for  a  comprehensive discussion); inflation can have many causes, of which the printing of money is only one. Yet because, according to the JBS, the Fed has been uniquely granted the power to print money in the United States (though the Fed does not actually have the power to print money; see Federal Reserve Bank of St. Louis 2015b), it is not merely the source but the beneficiary of inflation, and by “expanding the money supply . . . [it] devalues the money already in circulation” (5); thus, and this claim will be key in what follows, “since the establishment of the Federal Reserve, the U.S. dollar has lost over 95% of its purchasing power while the Fed maintains a monopoly over the issuance of bank notes or cash” (4).

This description radically misstates economic principles in several important ways. Most economists feel that moderate (but not runaway) inflation benefits an economy, particularly by encouraging the production of goods, since they may eventually sell for more than the producer would have been able to receive simply by holding on to his or her money (the reverse of this dynamic is the main argument against deflation; see Burdekin and Siklos 2004; Frisch 1983). The comparison of the value of US$1 between 1913 and 2009 is extremely deceptive, because it fails to take into account critical factors such as wage rates, the interest rate on savings, and the possibility of investing that US$1 in capital markets or in industry. A much less conspiratorial take on economic history would point out that US$1 invested in something as simple as a bank savings account using compound interest will typically be worth much more than the simple rate of inflation would provide by 2009; even slightly more aggressive investment would produce even more gains. A far more reasonable form of comparison would be to ask whether the average laborer needs to work more or fewer hours to purchase a like good in two different circumstances—for example a quart of milk or a pound of flour. This is why economists calculate such statistics not in raw numbers but in inflation-adjusted terms: the point is that all prices in an economy tend to adjust with inflation, including labor. Labor that earned US$1 in 1913 is likely to have earned around US$21.67 in 2009; and US$21.67 in 2009 buys about what US$1 did in 1913.[1] This is no disaster, “hidden tax,” or “destruction of value”; but viewed in isolation and taken out of context, it can provide a completely distorted view of both labor and economic history. The idea that inflation is a “destruction of value” and that the U.S. dollar has lost most or all of its purchasing power over the course of a hundred years has long been a staple of conspiracy theories, in no small part used by demagogues like Alex Jones to drive the unsuspecting toward purchases of gold and other precious metals (on inflation conspiracy theories in general see Aziz 2014 and Krugman 2011; for Ron Paul’s use of inflation conspiracy theories see Foxman 2012).

The extremist characterization of inflation may have found its way into some parts of popular discourse via its promulgation in JBS and other right-wing propaganda, but it was a theory developed and cultivated by the architects of neoliberal doctrine associated with the Chicago School of economics and the Mont Pelerin Society. Chief among these was MPS founding member and early 1970s president and University of Chicago economics professor Milton Friedman. Since at least the 1950s Friedman preached a very specific point of view about inflation, summarized in his famous (Friedman 1963) dictum that “inflation is always and everywhere a monetary phenomenon.” While this matter may have seemed an arcane and technical matter for economists, it ended up underwriting a new form of right-wing practice, where instead of demanding that governments take a “hands-off” policy toward markets as had their predecessors, neoliberals wanted to take control of state power for their own ends: “A primary ambition of the neoliberal project is to redefine the shape and functions of the state, not to destroy it” (Mirowski 2014, 56). When Friedman was hired as a senior adviser to U.S. president Ronald Reagan in 1981, he thus became the chief architect of a program called monetarism, according to which continuous modulation of the money supply controls inflation. Thus Friedman could want “to abolish the Fed” while writing “many pages on how the Fed, if it does exist, should be run” (Doherty 1995).

Friedman’s redefinition of inflation started out, like many extreme right-wing political dicta do in our time, as a fringe theory that few took seriously; then it became a backstop against which more  mainstream  economic  theories  could rest; then, via the direct exercise of the state power neoliberal theory claims to eschew, it forcibly took over the mainstream when only lukewarm resistance was offered by non-right-wing thinkers. Friedman’s dogma hangs on in the right

despite the fact that most non-far-right theories either posit multiple causes of inflation (Frisch 1983; Mishkin 1984) or at best suggest that “the conclusion that inflation is a monetary phenomenon does not settle the issue of what causes inflation because we also need to understand why inflationary monetary policy occurs” (Mishkin 1984, 3). Recent empirical studies (see Aziz 2013 and the discussion accompanying it; Tutino and Zarazaga 2014) dispute even the factual basis for Friedman’s claims. In a famous 2007 summary of Freidman’s life and work, Paul Krugman wrote that “some of the things Friedman said about ‘money’ and monetary policy—unlike what he said about consumption and inflation—appear to have been misleading, and perhaps deliberately so.” This is not to say that Friedman’s theory is itself wholly extremist ideology without the possibility of being correct, but it was long considered extreme, continues to be thought extreme by many who do not share Friedman’s neoliberal politics, and today functions  as  a critical  leg  on which  the  ideology of neoliberal  politics stands (Mirowski 2014 explains this in detail). Krugman and Mirowski suggest that Friedman’s theory may have been advanced as much for the political program it helps to promote as for its influence as economic policy. We can see this effect in much Bitcoin discourse, which takes up the simplistic far-right version of Friedman’s contention, claiming that inflation is just another name for the “printing of money” by central banks. From the farthest reaches of the explicitly anarcho-capitalist fringe (e.g., Frisby 2014) to the supposedly responsible mainstream (e.g., Vigna and Casey 2015, by two senior Wall Street Journal writers; Pagliery 2014, by a CNNMoney reporter), we find the same insistence on the monetary nature of inflation and the concomitant immunity of Bitcoin to inflation due to its limited total supply.

The proximate source for current Federal Reserve conspiracy theories is found in the writings of Eustace Mullins, one of the most prominent and extreme conspiracy theorists in the United States in the twentieth century, and author of the 1952 book The Secrets of the Federal Reserve. Mullins, a Holocaust denier and vitriolic anti-Semite, learned of the Federal Reserve during one of his visits to Ezra Pound at St. Elizabeth’s Hospital in Washington, D.C., where Pound was placed in lieu of criminal prosecution for treason due to his fascist World War II radio broadcasts. Mullins (1993, 6) calls him a “political prisoner.” The association between racist populism and conspiratorial opposition to the Federal Reserve is no accident: they have been intertwined at least since the Fed was created. Berlet and Lyons (2000, 194) trace these origins back even further, at least to the demonetization of silver in 1873, supposedly orchestrated by a “cabal of English, Jewish, and Wall Street bankers”; in some ways it goes back to the founding of the republic (see, e.g., Brands 2006; Michaels 1988).

The “secret” of the Federal Reserve, to Mullins, is remarkably similar to the “secret” behind the dissolution of the gold standard: it was a deliberate effort to deprive “ordinary people” (in fact, only those wealthy enough to have substantial assets in precious metals) of the value of their property, by other wealthy people who work in shadowy ways behind the scenes. The main architects of this plan are the Rothschild family, who by dint of being both British and Jewish galvanize the nationalist and racist impulses of U.S. populists:

The most powerful men in the United States were themselves answerable to another power, a foreign power, and a power which had been steadfastly seeking to extend its control over the young republic of the United States since its very inception. This power was the financial power of England, centered in the London Branch of the House of Rothschild. The fact was that in 1910, the United States was for all practical purposes being ruled from England, and so it is today. The ten largest bank holding companies in the United States are firmly in the hands of certain banking houses, all of which have branches in London. They are J.P. Morgan Company, Brown Brothers Harriman, Warburg, Kuhn Loeb, and J. Henry Schroder. All of them maintain close relationships with the House of Rothschild, principally through the Rothschild control of international money markets through its manipulation of the price of gold. (Mullins 1993, 62–63)

It is hard not to note that despite the Federal Reserve being the ostensible target of Mullins’s ire, the Fed quickly becomes for him almost indistinguishable from the targets of his other conspiracy theories, according to which the Rothschilds are the Jews are the Illuminati who have secretly controlled the United States from its inception and continue to do so to this day (in other works these connections are explicit; see, e.g., Mullins 1992).

Revising Secrets of the Federal Reserve in 1993 and adding the subtitle “The London Connection,” Mullins makes clear that this one family continues to be responsible for orchestrating the U.S. financial system: “The controlling stock in the  Federal  Reserve  Bank  of  New  York,  which  sets  the  rate  and  scale  of operations for the entire Federal Reserve System is heavily influenced by banks directly controlled by ‘The London Connection,’ that is, the Rothschild- controlled Bank of England” (203). This same line of thought is found in nearly identical form in the conspiratorial propaganda produced today by the Patriot, militia, and Tea Party movements in the United States (Flanders 2010; Lepore 2010; Skocpol and Williamson 2013), and by prominent conspiratorialists like Alex Jones, Henry Makow, and David Icke. In addition to Mullins, this view is promulgated in the writings of Martin Larson (1975), A. Ralph Epperson (1985),

  1. Edward Griffin (whose 1998 Creature from Jekyll Island includes an approving blurb from Ron Paul), and Murray Rothbard (2002) himself—as well as writers like Ellen Hodgson Brown (2008), who presents analyses nearly identical to those of Mullins and others without some of their explicitly right- wing trappings; and Anthony Sutton, a wide-ranging conspiratorialist  whose work mixes well-documented history with elaborate speculation, and whose writings on finance and the Federal Reserve  (especially  Sutton  1995)  repeat many of the same “facts” and inferences found in Mullins and others.


Bitcoin enthusiasts repackage material from these writers almost verbatim, regardless of whether they know the origins of that material. Despite the general rightist orientation of much digital  culture,  central  bank  conspiracism  is relatively new there, gaining a foothold only with the introduction of Bitcoin and the blockchain. In the Bitcoin literature, as in the central bank conspiracy writings, we read that the Fed is a private bank that hides its real purpose; that it steals money from some private citizens and put it in the hands of the “elites” that control the Fed; that the Fed itself is covertly run by a shadowy group of elites, often made up of Jews and members of English banking families such as the Rothschilds; and so on.

Bitcoin literature also advances the more subtle extremist argument that inflation and  deflation are  caused by monetary  policy rather than  by more conventional aspects of economies like consumer prices, commodity and asset prices, productivity and other aspects of labor, and so on. It is a cardinal feature of right-wing financial thought to promote idea that inflation and deflation are the result of central bank actions, rather than the far more mainstream view that banks take action to manage inflation or deflation in response to external economic pressures. This view is repeated with remarkable persistence and with a remarkable lack of critical examination in a significant portion of discussions about Bitcoin, regardless of their overt politics.

A third pillar of extremist thought we regularly find in Bitcoin circles is less specific to Bitcoin but more endemic in the digital world among cypherpunks, crypto-anarchists, and other advocates of nebulous digital causes like “internet freedom.” This is the presumption that computer-based expertise trumps that of all other forms of expertise, sometimes because everything in the world is ultimately reducible to computational processes (a view sometimes known as computationalism; see Golumbia 2009). This computer-centric point of view is extremely common throughout digital culture, and it is especially notable in Bitcoin discussions. The implication is that this lack of technical expertise disqualifies the critic from speaking on the topic at all. Of course, no such parallel expertise is granted to fields like economics and finance, despite their own highly technical nature. This selective evaluation of individuals based on a self-nominated set of meaningful and not-meaningful criteria fits uncomfortably well with the tendencies toward producerismanti-elitism,  and  anti- intellectualism that critics like Berlet (e.g., 2009, 26) see as endemic in contemporary right-wing movements. Keywords  like  “elite,”  “establishment,” and “academic,” at least at times, signal this rejection of all those forms of non- computational expertise.

A fourth and final pillar of extremist thought is also found both inside and outside Bitcoin discourse, but appears there with particular force: the idea that government itself is inherently evil, distinct in kind from other forms of power but not in terms of its responsibility to the democratic polity. Of course this view flows somewhat directly from the anarcho-capitalist thought of Rothbard and the antigovernment neoliberal doctrines of Reagan, Thatcher, and their supporters, the Koch brothers, the Cato and Heritage Foundations, and many more. It also flows directly from the views of crypto-anarchists and cypherpunks, and to only a slightly lesser extent from the general cyberlibertarian predisposition against internet regulation, and the way that many “privacy advocates” focus so much of their energy on what governments are apparently doing and so little on what corporations are provably doing. At the limit, these perspectives  suggest  not simply that current governments are corrupt or misguided, but that the project of governance itself is an idea whose time has passed, one to be superseded by markets and market-like mechanisms that offer no resistance at all to concentrations of power, and no formal means beyond market forces to hold those who abuse power accountable to the rest of us. Ironically, in so many ways, and yet befitting the actual political work they do in the world, by painting the world today as if it were an ungoverned “tyranny,” conspiratorial  belief systems help to pave the way for just such tyrannies to emerge.

Not all conspiracy theories are the same, despite the use of that term to disqualify   many   disparate   strands   of   thought   that   may   at   times   present themselves as alternatives to orthodox or dominant political views (for recent scholarly treatments of the range of “conspiracy theories” and the various meanings of the term see Birchall 2006; Bratich 2008; see also Mulloy 2005, which offers a solid account of the uses of conspiracy theory by right-wing extremist groups in the United States). Views that appear to be conspiratorial at one time may become established or even proven history at others; conversely, established history can turn out at later moments to have been fabricated. It is not the case that merely labeling an idea “conspiracy theory” means it is necessarily untrue. But the conspiracy theories associated with Bitcoin are among the most deeply entrenched, pervasive, politically charged, yet disproven of all the ongoing lines of political discourse in the United States and Europe. Whatever minor kernel of truth they contain (roughly, that very rich and politically powerful people exercise far more influence over the rest of us than we would like to believe) is almost entirely obscured by the projection of a shadowy, absolutely powerful, fundamentally evil racial or religious Other who is actually responsible for many major world historical events. These theories percolate almost exclusively on the extreme political right and serve (to some extent ironically) to mobilize and contain the political energies of those who subscribe to them. It is these theories that dominate not just Bitcoin rhetoric but also the actual functioning of Bitcoin as software and currency: we might say that Bitcoin activates or executes right-wing extremism, putting into practice what had until recently been theory.

There is much more about Bitcoin, its culture, and even its politics than can be accommodated in a short survey of its profound engagement with right-wing thought and practice. Here, my exclusive goal is to trace out this specific line of thought, both because of its urgency and because it has often  been misunderstood by some in the media and is continually misrepresented  by Bitcoin propagandists. The point is much less that Bitcoin is attractive to those on the right wing, than it is that Bitcoin and the blockchain themselves depend on right-wing assumptions, and help to spread those assumptions as if they could be separated from the context in which they were generated. Absent an awareness of that context, Bitcoin serves, like much right-wing rhetoric, to spread and firmly root a politics part of whose method is to obscure its material and social functions.

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